CRYPTO TAX IN INDIA 2025

                CRYPTO TAX INDIA 2025 - ALL DETAILS 

Decoding crypto taxation in India and all you need to know!

Is Crypto Taxed in India?

Yes, the virtual digital assets, or crypto assets, are taxed in India after the Union Budget 2022, where the Hon’ble Finance Minister, Mrs. Nirmala Sitharaman, announced revolutionary changes to the virtual asset class. For the first time, the government officially termed digital assets, including crypto assets, under “Virtual Digital Assets”. These comprise of all the cryptos such as Bitcoin, Ethereum, etc, and other digital assets such as Non-fungible tokens (NFTs). This article will serve as a guide to crypto taxes in India.

Key Takeaways

• Crypto Tax Implications in India: Profits earned from selling, swapping, or spending crypto assets in India are subject to a flat tax rate of 30%. This tax is further supplemented by applicable surcharges and an additional 4% cess, making it important for investors and traders to factor in these obligations while transacting in cryptos.
• Tax Regulations Under Section 115BBH:
  • The taxation of crypto assets in India is governed by section 115BBH of the Indian tax code. Under this section, there are no provisions for reduced tax rates, even for long-term capital gains arising from crypto transactions.
  • Additionally, deductions are strictly limited to the cost of acquisition of the asset. No other expenses, such as transaction fees or related costs, can be claimed as deductions while calculating taxable income.
• Tax Deducted at Source (TDS):
  • To ensure tax compliance, a 1% Tax Deducted at Source (TDS) is levied on all transfers of Virtual Digital Assets (VDAs). This applies to both individual and institutional transactions involving crypto assets. This measure, introduced on July 1, 2022, aims to ensure transparency in crypto transactions. The Union Budget 2025 emphasizes stricter compliance and reporting obligations under this rule, especially as crypto adoption grows.
• Income Tax Return (ITR) Reporting:
  •  Starting from the fiscal year 2025-2026, mandatory reporting by crypto exchanges and other designated entities will be enforced to ensure compliance and greater tax transparency.
• G20 Stance on Crypto Regulation: Discussions among G20 nations have emphasized that banning cryptos outright would be counterproductive and impractical. Instead, they advocate for the creation of a step-by-step regulatory framework that aligns with global standards, promoting oversight while fostering innovation in the crypto ecosystem.
• Crypto Taxation in the Interim Budget 2025:  The Interim Budget 2025 did not introduce any major changes to the existing crypto taxation rules in India. The prevailing regulations, including the 30% tax on profits from crypto transactions and the 1% TDS on transfers, continue to apply. However, the Budget introduced additional provisions for enhanced transparency, including mandatory reporting by crypto exchanges and other entities starting in the fiscal year 2025-2026. These updates aim to ensure compliance and facilitate smoother taxation processes for the growing crypto market.

Budget 2025 Crypto Tax Update

The Union Budget 2025 introduces a new framework for mandatory reporting of crypto transactions. Starting from the financial year 2025-2026, individuals and entities dealing in Virtual Digital Assets (VDAs) must report their crypto gains under a newly defined section in the Income Tax Return (ITR). This will be done in a dedicated Schedule VDA, which aims to streamline crypto-related tax reporting and improve transparency. Crypto exchanges and other entities involved in crypto transactions will also be required to submit detailed reports to tax authorities to ensure greater compliance and avoid penalties.

Budget 2024 Crypto Tax Update

The Income Tax Return (ITR) for the 2023-2024 financial year now includes a section, Schedule Virtual Digital Assets (VDA), specifically for declaring gains from cryptos and other digital assets. The filing deadline for this ITR was July 31, 2024, but you have an option to file a belated return by December 31, 2024.

Budget 2023 Crypto Tax Update

The Union Budget rules of 2022 have been one of India’s first laws to recognize crypto assets, hence putting down taxation on crypto in India. However, following that, crypto assets have been categorized as “virtual digital assets” and not “currencies” backed by the central bank. 

According to the 115BBH section of the Finance Bill, a taxable event is defined as:

1. Conversion of any digital assets to INR or any other fiat currency.
2. Conversion of one virtual digital asset type to another may include crypto-to-crypto trading or trading in stablecoins.
3. Paying for goods and services using a virtual digital asset.

As per the announcements on the taxation on crypto in India, the profits that will or have been incurred from the above transactions are subjected to a 30% tax, which is equivalent to India’s highest income tax bracket. Furthermore, if the transaction exceeds INR 10,000, the crypto tax will then have an additional 1% tax levied on them.

What are Virtual Digital Assets?

Virtual Digital Assets refer to any digital assets that are not physical or tangible. In layman’s terms, it basically means cryptos, DeFi (decentralized finance), and non-fungible tokens (NFTs). Prima facie excludes digital gold, central bank digital currency (CBDC), or any other traditional digital assets and is specifically aimed at taxing cryptos.

Crypto Taxation in India Explained

Though there are still many discussions that the Indian Government is yet to have with the Indian masses regarding the regulations on Crypto Taxation in India in India, or for the ‘Virtual Digital Assets’; according to the Budget 2025 session, these are the pointers any crypto investor should keep in mind:

1. Income from the transfer of virtual digital assets such as crypto and NFTs will be taxed at 30% at the end of each financial year.
2. No deduction, except the acquisition cost, will be allowed while reporting income from the transfer of digital assets.
3. Loss from digital assets cannot be set off against any other income.
4. The gifting of digital assets will attract tax in the hands of the receiver. Losses incurred from one virtual digital currency cannot be set off against income from another digital currency. 1% TDS point should also be mentioned in this list of pointers as it was announced in Budget 2022.
5. Mandatory Reporting from 2025-2026: Starting in the fiscal year 2025-2026, mandatory reporting requirements will apply to both individuals and crypto exchanges, making it necessary to report all crypto transactions under a dedicated section in the Income Tax Return (ITR).

As per Section 206AB of the Income-Tax Act, 1961:

1. If any user has not filed their Income Tax Return in the last two years and the amount of TDS is INR 50,000 or more in each of these two previous years, then the tax (TDS) to be deducted for Crypto-related transactions will be at 5%.
2. TDS provisions will apply if an order is placed before July 1, 2022, but the trade is executed on or after July 1, 2022

How Much Tax Will You Pay on Crypto in India?

In short, two types of crypto taxes are now set to be levied on crypto assets. There is a 30% tax on the annual profits from crypto trades and a 1% TDS on every crypto transaction. The TDS cut is eligible to be filed for returns during the ITR filings. 

What is 1% TDS on crypto?

According to the revised Income Tax Regulations for Crypto Taxation in India, the 1% TDS applies to all crypto asset sell transactions. This will be effective from July 1, 2022. However, please note that the TDS will be deducted from the final sale amount, not just the profits. For TDS, it doesn’t matter if you earn a profit or book a loss on your trade. It will be deducted, no matter what.

How is the 30% Crypto Taxation in India Calculated?

The flat income tax rate of 30% is applicable to retail investors, traders, or anyone transferring crypto assets in a given financial year with no distinctions between short-term and long-term gains. The 30% tax rate is levied on any profits made from the transfer of virtual assets. 

This 30% crypto tax rate under the current crypto taxation in India will remain the same irrespective of the nature of income i.e., it does not matter if it is an investment income or business income and is irrespective of the holding period.

Do You Pay Tax When You Sell Crypto in India?

Yes, If you sell your crypto and make a capital gain, there is 30% tax on that gain, whether you’re selling for currencies like INR,USD or trading one crypto for another.

Selling Crypto for Fiat Currency (INR)

• 30% Tax: Any profits you make from selling crypto for INR are taxed at a flat 30% rate.
• 1% TDS: Additionally, a 1% TDS will be deducted. If you’re using an Indian exchange, this TDS is automatically deducted.

Restrictions on Loss Set-Off for VDA Transactions under the Income Tax Act

Additionally, The Income Tax Act explicitly prohibits offsetting losses incurred from the transfers of Virtual Digital Assets (VDAs) against income or gains derived from other VDAs. For example, if an individual sells one crypto asset incurring a loss, this loss cannot be offset against a gain made from transferring another VDA (depicted in example 2 below).

 To understand further, let’s see some examples:

Example  1:

If an investment of INR 1,00,000 was made in crypto at the beginning of FY2022, and by the end of FY2022, the crypto was sold for INR 1,50,000, a flat 30% crypto tax is applicable on an income gain of INR 50,000. As an investor, you will be liable to pay INR 15,000 (plus surcharge and cess) as taxation on crypto income in that financial year.

It should be noted that any income arising on transactions relating to crypto shall be taxed only at the time of transfer of such crypto i.e., if a person continues to hold the asset, the holding is not taxable on such unrealized gains. 

Example 2:

*It is to be noted that in this example, we are only adjusting the losses in the same financial year from the same source of income and not setting off prior period losses or losses from any other business.

Transactions undertaken during FY 2022-23 

Transaction 1: Bitcoin bought for ₹5 Lakh and sold for ₹6 Lakhs

Transaction 2: Ethereum bought for ₹2 Lakhs and sold for ₹1.5 Lakhs

Net income from the above transactions shall remain as ₹1 lakh which is the profit earned from the Bitcoin transaction.

30% tax on Crypto in India income for FY 2022-23: 30% of ₹1 lakh = ₹30,000 (plus surcharge and cess).

When Do You Have to Pay 30% Tax on Crypto in India?

When engaging in various transactions involving crypto assets, it’s crucial to understand the implications of crypto taxation in India implications to ensure compliance with applicable regulations. One notable requirement is the payment of a 30% tax on crypto in India, which is applicable in the following scenarios: 

1. Selling crypto assets for Indian Rupees (INR) or any other fiat currency: If you sell your crypto assets in exchange for traditional currency, such as INR, you will be subject to a tax rate of 30% on the profits derived from the transaction.
2. Trading crypto tokens for other crypto tokens, including stablecoins: If you participate in the exchange of one type of crypto for another, or even if you swap your crypto assets for stablecoins, it’s essential to be aware that the resulting profits will be taxed at a rate of 30%.
3. Spending crypto on goods and services: Using your crypto assets to make purchases of goods or services is also subject to taxation. In such cases, any gains generated from the transaction will be subject to the 30% tax rate.

By recognizing these tax obligations and fulfilling your responsibilities, you can ensure that your crypto transactions are conducted legally while maintaining a clear understanding of the associated implications of crypto taxes.

Note the following crypto tax reporting dates: 

In India, the financial year (FY) spans from April 1 to March 31 of the subsequent year. To illustrate, the current financial year is designated as April 1, 2024, to March 31, 2025, identified as FY 2024-25. When you file your taxes this year, you will report on the financial activities and transactions that occurred during this particular financial year.

For crypto-related transactions, starting from FY 2025-26, individuals and entities will need to report their crypto gains and other related activities under the dedicated Schedule VDA section in the Income Tax Return (ITR). 

How Will Crypto Tax of 30% be Applicable on Crypto as a salary? 

The Individual Income Tax Slab Rates for FY 2022-23 (AY 2023-24) are as mentioned below. 

When engaging in various transactions involving crypto assets, it’s crucial to understand the implications of crypto taxation in India implications to ensure compliance with applicable regulations. One notable requirement is the payment of a 30% tax on crypto in India, which is applicable in the following scenarios: 

1. Selling crypto assets for Indian Rupees (INR) or any other fiat currency: If you sell your crypto assets in exchange for traditional currency, such as INR, you will be subject to a tax rate of 30% on the profits derived from the transaction.
2. Trading crypto tokens for other crypto tokens, including stablecoins: If you participate in the exchange of one type of crypto for another, or even if you swap your crypto assets for stablecoins, it’s essential to be aware that the resulting profits will be taxed at a rate of 30%.
3. Spending crypto on goods and services: Using your crypto assets to make purchases of goods or services is also subject to taxation. In such cases, any gains generated from the transaction will be subject to the 30% tax rate.

By recognizing these tax obligations and fulfilling your responsibilities, you can ensure that your crypto transactions are conducted legally while maintaining a clear understanding of the associated implications of crypto taxes.

Note the following crypto tax reporting dates: 

In India, the financial year (FY) spans from April 1 to March 31 of the subsequent year. To illustrate, the current financial year is designated as April 1, 2024, to March 31, 2025, identified as FY 2024-25. When you file your taxes this year, you will report on the financial activities and transactions that occurred during this particular financial year.

For crypto-related transactions, starting from FY 2025-26, individuals and entities will need to report their crypto gains and other related activities under the dedicated Schedule VDA section in the Income Tax Return (ITR). 

How Will Crypto Tax of 30% be Applicable on Crypto as a salary? 

The Individual Income Tax Slab Rates for FY 2022-23 (AY 2023-24) are as mentioned below.When engaging in various transactions involving crypto assets, it’s crucial to understand the implications of crypto taxation in India implications to ensure compliance with applicable regulations. One notable requirement is the payment of a 30% tax on crypto in India, which is applicable in the following scenarios: 

1. Selling crypto assets for Indian Rupees (INR) or any other fiat currency: If you sell your crypto assets in exchange for traditional currency, such as INR, you will be subject to a tax rate of 30% on the profits derived from the transaction.
2. Trading crypto tokens for other crypto tokens, including stablecoins: If you participate in the exchange of one type of crypto for another, or even if you swap your crypto assets for stablecoins, it’s essential to be aware that the resulting profits will be taxed at a rate of 30%.
3. Spending crypto on goods and services: Using your crypto assets to make purchases of goods or services is also subject to taxation. In such cases, any gains generated from the transaction will be subject to the 30% tax rate.

By recognizing these tax obligations and fulfilling your responsibilities, you can ensure that your crypto transactions are conducted legally while maintaining a clear understanding of the associated implications of crypto taxes.

Note the following crypto tax reporting dates: 

In India, the financial year (FY) spans from April 1 to March 31 of the subsequent year. To illustrate, the current financial year is designated as April 1, 2024, to March 31, 2025, identified as FY 2024-25. When you file your taxes this year, you will report on the financial activities and transactions that occurred during this particular financial year.

For crypto-related transactions, starting from FY 2025-26, individuals and entities will need to report their crypto gains and other related activities under the dedicated Schedule VDA section in the Income Tax Return (ITR). 

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